Heavy Spanish tax fines may hit expats

Are you an expat living in Spain? You could be stung hard if you fail to declare your assets. Spanish authorities are giving all residents, including Britons, until the end of April to come clean on overseas assets - from cash in the bank to shares and life insurance - worth more than €50,000.

Thousands of Britons could be at risk from the draconian new fines.

Heavy hit

"If someone is already compliant," accountancy expert David Truman told the Telegraph, "they will have forms to fill in that they didn't have to before. But if you have been living in Spain without declaring your overseas income, you could be in trouble."

Considerable trouble. The fines could exceed the value of your asset if you don't comply. The minimum fine is €10,000. Unpaid tax from overseas assets is judged a criminal offence. Be aware though that the Spanish aren't targeting just Britons; this reporting requirement is looking at all Spanish residents.

Tax advisers Blevins Franks say that under Spain's normal tax rules, the taxman can only go back four years from the date a tax return should have been submitted.

Piling up

"When you add the tax due with the penalties, plus late payment interest, plus the extra fine, many people could find the amount they owe the Hacienda (Spanish tax office) is more than the value of the asset," it says.

Most Britons will be considered a Spanish tax resident if they are in the country for 183 or more days during 2012. Be aware that the Spanish tax authorities are arming themselves with an increasing number of tools to locate tax dodgers.

Better connected

The authorities have linked up with the land registry and have records of everyone owning property in Spain; electricity companies now provide information to the Hacienda on the electricity usage of each property, as well the names on the invoice and bank account payments are made from.

Cash-strapped Spain, Europe's fourth biggest economy, is looking at all ways it can legitimately tighten up cash-generation, especially given the increasing attention globalised tax avoidance is taking. Spain's partly shattered economy - it shrank by 1.4% in 2012 - has seen some Britons return.